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Paramount Must Get Skydance’s Approval for Paramount+ JV and Package Deals

Paramount Must Get Skydance’s Approval for Paramount+ JV and Package Deals

Paramount Global board’s window for seeking superior bids ends on August 21

The full terms of the deal for Skydance Media’s acquisition of Paramount Global were revealed Thursday. And as expected, there are several restrictions on what Paramount and Skydance can do in the lead-up to closing without the other party’s approval.

Under the terms of the deal, Paramount Global has the right to investigate a better offer within a 45-day window. And as previously announced, Paramount will have to pay a $400 million termination fee to the Skydance investor group.

It is also detailed in the 273-page transaction agreement disclosed in the 8-K. filingThere are some restrictions on Paramount+.

Paramount is not permitted to enter into any joint venture or “omnibus content licensing and/or subscriber acquisition/migration” arrangement involving Paramount+ without Skydance’s written approval. The terms of the agreement state that Paramount will “consult in good faith with Skydance on any material developments” regarding negotiations involving a JV arrangement for Paramount+.

Additionally, Paramount may not enter into a new agreement or enter into such an agreement “outside the ordinary course of business” regarding the combination of Paramount+ with “any of the top seven third-party streaming services by subscriber base in the U.S.” Paramount must also obtain approval to enter into an agreement that would extend the term of an existing streaming distribution agreement beyond one year.

One potential streaming partner for Paramount is Warner Bros. Discovery, which is open to exploring a combination of Max and Paramount+.

“We’ve had a lot of inquiries from a lot of people about partnerships that could involve a partnership with another player or players. And so we’ll evaluate all of those,” said Jeff Shell, a RedBird executive and former NBCUniversal CEO who is set to become Paramount’s chairman once the deal closes. Speaking at a presentation for investors on Monday, Shell said Paramount’s current management team “has potentially developed a plan for the international business, that we think is likely to execute from now until closing, and that would be very compelling for the cash flow generation of the DTC segment.”

Internationally, “we are advancing discussions with potential partners who will significantly transform the scale and economics of the (streaming) service, make it profitable and create long-term value. This approach could be a model for the U.S.,” Chris McCarthy, chairman and CEO of Showtime/MTV Entertainment Studios and Paramount Media Networks, said at a June 25 employee briefing.

Meanwhile, there are other restrictions spelled out in the deal. For example, as is customary, neither Skydance nor Paramount can greenlight or commit to “producing, acquiring, or financing any Property” without the other company’s approval.

Under the agreement with Skydance and financial backer RedBird Capital Partners, a special committee of Paramount’s board of directors has a 45-day shopping period during which it will be allowed to “actively solicit and evaluate alternative acquisition offers.” According to Paramount, it “does not intend to disclose developments regarding the shopping process until it determines that such disclosure is appropriate or otherwise necessary.”

The shopping window ends at 11:59 p.m. ET on Aug. 21, 2024. If Paramount Global begins discussions with a potential bidder that the board’s M&A special committee “in good faith expects or reasonably expected to result in a Superior Offer,” the company may extend the shopping period to Sept. 5, 2024.

The deal’s “go shop” clause was agreed to by the Skydance team in lieu of requiring Paramount Global’s non-voting shareholders to approve the deal, and is apparently intended to minimize the threat of shareholder lawsuits against Paramount’s board and Shari Redstone’s National Amusements Inc., which owns a controlling voting stake in Paramount.

“The special committee (of the Paramount board) conducted a full, thorough and fair process to complete the transaction with us,” said David Ellison, CEO and founder “So we believe it’s appropriate, if someone comes forward, to give them 45 days to see if that’s a possibility,” Skydance Media said in a presentation to Paramount investors on Monday.

There is no sign yet that anyone else will emerge to snatch Paramount from Skydance. In May, Sony Pictures and private equity giant Apollo Global Management emerged as possible bidders for Paramount Global, but they have since backed away from their $26 billion cash offer to buy the entire company.